Beleaguered Republic First Bancorp Inc. became the first bank failure of 2024 after asset seizures reached a record high in 2023.

The Pennsylvania Department of Banking and Securities closed the Philadelphia-based company's bank subsidiary April 26 and appointed the Federal Deposit Insurance Corp. as receiver. The FDIC entered into an agreement in which Fulton Financial Corp. subsidiary Fulton Bank NA will assume substantially all of the deposits and purchase substantially all of the assets of Republic First Bank.

Republic First, which had $5.87 billion in total assets as of year-end 2023, is the sixth-largest failed bank by total assets since 2010. However, it is much smaller than the 2023 failures of Silicon Valley Bank and First Republic Bank, which were over $200 billion in assets, and Signature Bank, which was over $100 billion. The closure of those banks pushed the total assets of failed banks in one year to the highest recorded level.

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But Republic First is much larger than the two other banks that failed in 2023, and its failure is a reminder that the operating environment for depositories remains challenging.

Similar to many other banks, higher interest rates put pressure on Republic First by increasing unrealized losses in its available-for-sale securities portfolio. Republic First's unrealized losses were large and were viewed as a factor that could hinder buyers' interest. Buyers must mark a seller's securities book to market when closing a deal, and the underwater securities would reduce accumulated other comprehensive income and drive down tangible book value.

Republic First also faced its own set of troubles. The company has yet to file year-end financials with the SEC in 2022 and 2023; it dealt with multiple shareholder activism campaigns since 2021; and three times it failed to complete announced capital raises.

Failed opportunities

The company's need for capital was driven in part by the urgency to improve profitability and improve its metrics. It had been severely underperforming compared to its peers active in the Philadelphia metro area and was deteriorating. As of Dec. 31, 2023, its tangible common equity ratio was 1.73%, and leverage ratio was 4.43%.

Other banks under pressure have turned to private investors to help shore up their outlooks. In July 2023, a $400 million capital injection into Banc of California Inc. made it possible for the roughly $9 billion-asset-sized bank to acquire the much bigger PacWest, a roughly $38 billion bank, which was wrestling with deposit outflows and a deteriorating stock price. In March, New York Community Bancorp Inc. raised $1.05 billion in equity financing and brought on a new management team. That helped stabilize deposit outflows and spurred hope for a turnaround, as the bank has been facing growing pains due to increased regulation and additional expenses after crossing the $100 billion asset threshold in 2023.

Republic First made efforts to reach its own investor agreements. One came in March 2023 and included an $125 million commitment from affiliates of Castle Creek Capital and Cohen Private Ventures if additional investors could be found. It was canceled in July 2023, however, after parties came to believe they were unlikely to find additional participants based on the specified terms. In September 2023, the company announced another agreement with an investor group led by George Norcross III, Gregory Braca and Philip Norcross, who would provide $35 million contingent upon the company raising an additional $40 million from third-party investors. That also never came to fruition.

On Oct. 27, Republic First announced a new agreement with the same investor group without any contingencies. But the investor group terminated its capital commitment, citing Republic First's lack of actions to meet closing conditions, including filing the company's 2022 10-K and scheduling the required shareholder meeting.

Republic First's efforts to find backers or a potential buyer were complicated by an October 2023 report that the FDIC reportedly solicited bids from interested buyers but paused the auction process. The rumor of failure — true or not — gave potential suitors little incentive to pay up if they believed that they could eventually take part in a government-assisted deal.